Thursday, August 28, 2008

Numbers Games

A couple of weeks ago I complained about Barack Obama's definition of rich. He counts anyone who is making $250,000/year or more as rich. Now Dan Gross from Newsweek is trying to justify this reasoning.

Gross's case is the same one that Democrats have been using for years - if you make more than most Americans then you must be rich.
I have two pieces of bad news for the over-$250,000 crowd. First, the reversal of some of the temporary Bush tax cuts is probably inevitable, given the Republican fiscal clown show of the past eight years. Second, I regret to inform you that you are indeed rich.
To a large degree, feeling rich or poor is a state of mind, as John McCainrecently noted. "Some people are wealthy and rich in their lives and their children and their ability to educate them. Others are poor if they're billionaires." But income data can surely tell us something. And they tell us that $250,000 puts you in pretty fancy company. The Census Bureau earlier this week reported that the median household income was $50,223 in 2007—up slightly from the last year but still below the 1999 peak. So a household that earned $250,000 made five times the median. In fact, as this chart shows, only 2.245 million U.S. households, the top 1.9 percent, had income greater than $250,000 in 2007. (About 20 percent of households make more than $100,000.)
Ok, so making more than $250,000 puts you in the same group as Larry Ellison who is paid $72 million/year. That does not give you Ellison's purchasing power.

The thing is that making somewhat more than the average joe doesn't make you rich. The only thing that can make you rich is being rich.

Here's an example. Sean Combs (aka Diddy, aka Puffy, aka P Diddy, aka Puff Daddy, aka Sean John) is complaining because he can't afford the gas to fly his private jet.

As you know, I do own my own jet and I have been having flying back and forth to L.A. pursuing my acting career. Now, if I'm flying back and forth like twice in a month, that's like $200,000 or $250,000 round trip. I'm back on American Airlines right now. OK? Your boy Diddy right now is on American Airlines.

Did you get that? It costs Combs $250,000 to fly his private plane round trip across the country. I guarantee that someone making that much per year doesn't own a private jet to say nothing of spending a year's income on making one cross-country flight in it. Who can afford a private jet? Someone who is rich.

But Gross insists that people making $250,000 are rich, they just don't know it. Why not? Because they are comparing themselves to the wrong people.

But people in Georgetown mansions don't necessarily compare themselves to fellow Washingtonians in Anacostia. Relative income really works at the neighborhood level.

Again, I have news for Gross. People who make $250,000 are not living in Georgetown mansions. They probably paid $1,000,000 for a four bedroom, two bathroom house inside the Beltway and are struggling with the mortgage. I've seen what a half-million will buy in the DC market and it is no mansion.

But Obama has to be inclusive in his definition of who is rich. There just isn't enough money to confiscate from the truly rich (plus, they will shelter it before he cane take it) so he has to go after a larger group.

And Gross is an attempt to help Obama by a left-leaning financial journalist.

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